The Universities Superannuation Scheme, the second-largest pension fund in the UK, has significantly boosted its compliance resources to cope with the growing burden of regulation from the European Union and elsewhere.

Roger Gray, chief investment officer for USS, said: “Whereas we just had a single person on the legal side two years ago, we now have general counsel and four lawyers. Compliance has grown from two to three people.

“The investment risk and performance team has grown from two to four professionals. This has all added to the cost of our investment activities.”

USS’s staff increases also came from its own efforts to expand its investment resources, notably in relation to hedge funds.

Others said European pension schemes were under increased pressure from new and proposed regulations and reviews.

These include the European market infrastructure regulation; the EU’s institutions for occupational retirement provision directive II, or IORP; Dodd-Frank in the US and professor John Kay’s review of UK equity markets and long-term decision making.

USS is one of the first pension funds to build out its in-house compliance team. The chief executive of one of the other 10 largest UK pension schemes said: “We haven’t yet increased our legal team, but we do draw increasingly on legal/compliance advice from our sponsor’s legal team and outside.”

Glyn Ryland, head of pensions at law firm Wragge & Co, said: “We have seen increased use of external advisers, because regulators have been turning up the heat on scheme governance.”

In the latest regulatory move, the European Commission said in a communiqué on October 25 that it was considering a directive that would force all investment funds and financial institutions to disclose “any ethical or responsible investment criteria they apply”.

The move would also be the first direct intervention into corporate and social responsibility from the European Union since 2001.

Steve Waygood, head of sustainability research and engagement at Aviva Investors, said: “It would have broad implications for large sections of the financial services industry that have not previously had to disclose this.”

Penny Shepherd, chief executive of investor body UK Sustainable Investment and Finance, welcomed the move. She said: “By supporting the disclosure of information, you create the environment where clients and civil society can scrutinise the financial sector more closely.”